After an awesome rally in month of May, Is this the pullback everyone is waiting for!!! New government has announced very aggressive and progressive strategies, however everything depends on execution. Will you bet your money in this market?

Not much has changed in below chart and all signs are bullish.

As we can see many red bars (on extreme right side which are recent past trading days) in recent days along with long TOP tails suggested a probable pullback or sideways action.

Weekly chart provides a better picture. If this market can have a orderly pullback towards rising WMA(10) then that would be excellent opportunity to buy, BUT WHY? To understand this behavior, we will have to look at similar historical periods pertaining to this market. next chart will answer that question. However, the market can also decide to move sideways and move higher without waiting for WMA(10) to catch up.

Check below weekly chart and try to observe a pattern, pay attention! Can you identify a pattern in every rally shown by yellow shaded area? Every rally pulls back to the red line at some point and bounces higher until a final top comes and it breaks down below red line. Look at 2014 chart in upper right corner, rally has started and now we are witnessing pullback/consolidation.

As suggested in our last weeks post, we have two scenarios:

Tremendous growth - A period similar to 2003-2007 where Nifty went from 2000 to 6000 in just 3 years (a 200% rise) and anyone who invested in anything made money blindly. BUT anyone who invested wisely made solid financial fortune and might have even achieved financial freedom. Current market can present similar opportunity of 200% gain in next 3-5 years depending very much on execution strategy, progressive changes in governing policies along with economic growth, hence if you invest wisely then this could be your chance to make it BIG.

False picture - All the hype of "Modi" sarkar vanishes in coming months due to incapacity or lack of control in delivering the promises which would be very devastating to markets and could trigger the bear market.

Moral of the story - Invest at right time with good strategy and always have a exit plan. DO NOT invest blindly, without any targets or stop limit. Whenever in doubt, just don't do anything stupid.

What does it mean for our Investments?

Mutual Funds - If already invested in equities then stay put, use the pullback as an opportunity to add to original position. If in FDs/Liquid Funds/Cash then wait for market to consolidate around current levels. You can also start testing waters by investing small portions for now but make sure you have exit plan just in case market drops.

Stocks - Invest in strong patterns with good earnings but DO NOT chase stocks at highs. Wait for a pullback or consolidation, remember timing matters and use STOP LIMIT to protect from big loss. Try our trade sizing tool.